You cannot ride someone else’s wave

November 18, 2010

An interesting ruling from the Circuit Court in Sarasota County, FloridaMartha L. Gwynn vs. City of Venice Code Enforcement Board

Background

In the summer of 2009, the City of Venice, Florida, issued an ordinance banning rentals for less than thirty (30) days in residential neighborhoods. The ordinance defined a legal non conforming resort dwelling as a dwelling in a residential zoning district “which is rented to guests more than three time in a calendar year for periods of less than 30 days […] or which is advertised or held out to the public as a place regularly rented to guests for periods of less than 30 days […].”

This was the City’s second attempt at prohibiting vacation rentals in single-family districts. The first attempt was thwarted by a group of homeowners led by Steve Milo — in 2007, Steve Milo et al. brought a lawsuit against the City of Venice claiming it had infringed on their property rights.

In August 2009, Milo et al. reached a settlement with the city after a judge ruled in their favor, finding that the City of Venice had acted “erroneously” in interpreting their existing code to ban short-term rentals. The city agreed to pay Milo’s group $300,000 and allowed them to continue renting their properties on a short-term basis.

A month prior to this settlement being reached, the City of Venice passed the above-mentioned ordinance banning short-term rentals.

As stated in a press release, “[w]hile Milo and his group of property owners recovered money and retained their rights to rent their properties on a short term basis for 15 more years, other Venice property owners lost their rentals rights. On July 17, the Venice City Council passed a new ordinance that banned the practice of short term rentals in single-family residential neighborhoods.”[1]

Property-owner Martha L. Gwynn

Martha L. Gwynn had been renting her property on a short-term basis prior to the ban taking effect. In August 2009, she was cited for violating the new ordinance.

The main claims brought by Martha L. Gwynn against the City of Venice Code Enforcement Board

(1) The Ordinance was facially unconstitutional

She argued that the ordinance is unrelated to any legitimate objective of the city and therefore violates the due process clause of the state and federal constitution. The court disagreed stating, “the United States Supreme Court has recognized that the protection of a residential neighborhood is a legitimate objective of a land use ordinance.”

Her second argument was that this ordinance discriminates against certain persons who rent property. The judge rejected this claim noting that courts in Florida and elsewhere have upheld numerous ordinances regulating short-term rentals.

She also alleged that the ordinance was a regulatory taking restricting a homeowner’s freedom in the use of his or her property and enjoyment of the proceeds. The court disagreed.

The court refused to find the ordinance facially invalid and to strike it down in its entirety but instead ruled that it was unconstitutional as applied to her.

(2) The Ordinance was unconstitutional as applied to her.

The court stated that the ordinance (i) has a significant economic impact on her, by restricting the duration and frequency of rental periods; (ii) interferes with her expectation that she could rent to seasonal visitors.

The court added that because she was renting her property on a short-term basis prior to the ban coming into effect, the ordinance could not be enforced against her as written.

Conclusion

Courts are very reluctant striking down ordinances banning short-term rentals. However, when a homeowner brings a lawsuit challenging an ordinance, courts are often willing to find it to be unenforceable against him or her as long as he or she can prove that the ordinance interferes with his or her reasonable investment-backed expectations.

It is time for New York City property owners to let go of the mistaken belief that they need not be concerned about the short-term rental ban to be implemented in New York City in May 2011 as some other property owners will likely bring their own legal challenge to declare it unconstitutional. We should all keep in mind that the legal victory of individual property owners may remain their victory alone.

While I sympathize with people who bought their property in expectation of investment, I think you need to consider those who bought property in hopes of quiet enjoyment and a community. I live in Seattle, where condo owners can turn their units into short-term rentals. The renters inevitably are noisy and rude. The “landlords” do not pay extra association fees, but their renters make huge demands on the staff.

My apartment is directly under a unit that was converted to a rental unit. It is a nightmare. The “landlord” packs 4-6 tourists into a 2-bedroom unit that normally would house one or two people. They clomp around in heavy shoes. Yes, I can complain, but my life has become a nightmare of complaining … since every week a new “guest” arrives with a new set of issues.

The “guests” have no concern for security. Many come from the midwest, where they live in houses in small towns. They don’t understand the concept of security, so they hold doors open for strangers. They’re on vacation so they want to hold loud parties.

The real problem is that the “landlord’s” interests are adversarial inherently. The owner of a rental unit wants lots of people and doesn’t care how the behave. A hotel manager does care, because a guest who misbehaves will cost him money.

Short of 24/7 security, there is no way to handle short-term guests. That’s why hotels have front desks and security guards.

Although this is a Flordia case, it may be a decision the ny courts may look at as a precedent for those nyc owners who have been rountinely renting and advertising their property on a short term basis prior to ban being signed into law on July 24, 2010 ad going into effect on May 1 2011.

The Florida court found that the ordinance banning 30 day rentals had a significant economic impact on the owner by restricting th eduration and frequency of rental periods. Additonally the court found the ordinance interfered with owner’s expectations that she could rent the property to seasonal visitors. The court found the owners “taking” claim as meritorious as she owned property prior to the Ordinances adoption. The court found that the ordinance was unconstitutional as as appled to owner. The city cannot enfore the ordinance as written against owner.

This case is a positive legal development for owners of short term vacation rentals